With markets higher than any time in history

[Mr._Graybeard]

I did reduce positions in international funds/ETFs by about 40% the day after the el*ction. They have seen some shocks after I did so. I may regret not cutting back further, but companies like Nestle and Novo Nordisk aren't going anywhere.

 

[gcgang]

I remember this from almost 40 years ago. Legendary international mutual fund manager John Templeton, while almost always expressing optimism, said it’s NORMAL for stocks to decline 50% at any time. You’ll never know when, but that risk is why returns in equities are higher than “safe” investments.

If you don’t want/need higher returns, or can’t survive a 50% decline in your stocks, probably better to get out.

 

[jebmke]

What a lively discussion! I'm 100% behind the camp that thinks increased deficit spending, high tariffs, and mass deportation of millions of working age people will drive inflation way up. Not sure all those things will actually happen; but that's the current narrative I'm working with.

I'm already almost 100% in equities (mostly tech) since I just don't like bonds. In my mind my rental real estate was the 'bond' part of the portfolio, but now I don't have much apatite to take on new rentals.

So that leaves me with trying to rotate my equities into ones that should perform well in an inflationary environment. I'm leaning towards commodities but don't have a lot of experience there. Maybe some more gold (which I think is an outdated store of value)? Or more of the asset class that can not be discussed here. I'm reluctant to pick up more of that asset since what I already have has grown so much that it's already over allocated.

Curious what other's are buying to protect themselves from inflation.

Tips will provide some protection against unexpected inflation. My preference at my age is on the shorter end. In 2008 I bulked up on 2025s at 3+% real. Those are maturing in January. I will probably dump the proceeds into VG Short Term fund. ST nominal bonds will also provide some inflation protection as the bonds turn over, the higher yields will take over. I also have a large position in ST Treasuries (nominal) and the income on that holding skyrocketed as short-term yields went up over the last couple of years.

 

[corn18]

My 30 year 2.25% fixed rate mortgage with 27 years left is my inflation protection. I'll likely be dead before I pay it off.

 

[calmloki]

Street, looks to me like you are in great position with almost 6% for the next 8 years. I was happily buying T-Bills for the last couple years - kinda dumb as our income from rent and interest income means big taxes so buying and holding stocks would have reduced taxes, keeping more in our net worth pile. Been cancelling the T-Bill auto-rolls and letting cash build up - now at something like 12% of our NW and making about 4.5%. REALLY hard for me to buy high, so waiting for a good point to buy more stocks, but cheapy me - put a 60 day buy order in for VTI almost two months ago which hasn't filled as VTI is now about $90 higher than my buy order. Had I bought back then we would be up about $25/share. Ah well. Good to have assets, thinking the next few years will be good for those who have.

 

[twirler]

In the last week what is your thought on what the markets are telling us. I know economy and stock market are two different things and each can go their separate ways from each other.

With prime dropping last week and inflation not rising what do you see for the future of equity funds and bonds?

I would guess equity shares will be worth less and bonds doing well.

With money tied up in long range accounts CD's what happens to CD futures? I have money tied up for 8 more years getting 5.89% is that a good deal going forward or could I have done better just staying in the markets?

Looking for any opinions or views. The question is very wide open so wonder the direction it takes.

If the market goes up I buy, if the market goes down I buy, if the market goes sideways… I buy.

Stay out of debt.

Purchase enough bonds, cds, treasuries, or whatever you feel is good. Keep a little bit of cash around.

Ignore the noise *cough* news.

 

[Earl E Retyre]

My AA is higher in equities than usual and agree with the concerns several of you mentioned… so perhaps I should rebalance. However, if I do, it would impact ACA subsidies and would owe quite a bit back come tax time. Not sure if others do not rebalance simply because of ACA.

 

[marko]

I've said it here before: I wish I had a dime for every dire prediction that never happened. I'll stay the course, ride out the bumps and buy the big dips.

 

[athena53]

I hedged my bets a bit- donated appreciated stock to my Donor Advised Fund and sold enough of one of my highly-appreciated ETFs (VTSMAX) to fund my quarterly draw for 2025. If I called the top of the market wrong- oh, well.

 

[jebmke]

I've said it here before: I wish I had a dime for every dire prediction that never happened. I'll stay the course, ride out the bumps and buy the big dips.

for many years the majority of our assets were in a pension scheme where we only saw the valuation once a year. I got used to doing nothing

"Procrastinator is my name, doing nothing is my game."

 

[Dtail]

I've said it here before: I wish I had a dime for every dire prediction that never happened. I'll stay the course, ride out the bumps and buy the big dips.

Dire predictions get more reads, plus when it does eventually happen, they claim I told you so, without recognizing the majority of their predictions were incorrect.

 

[Rianne]

Great thread, learned a lot as usual. No one mentioned this, mods might not like this observation and mods you can remove, NP. I don't think this is political. We're possibly looking at an entirely different govt. system. Could be great! Clean out cobwebs and cut govt. spending, or make it more efficient. I'm trying to get my head around how this would affect the markets. My guess is the markets would love it.

 

[Out-to-Lunch]

We're possibly looking at an entirely different govt. system.

What precisely do you mean by "different govt. system" ? (Emphasis mine.) As I understand that term, such a change would require a bloody revolution or a Constitiutional Convention. I doubt the markets would favor either of those.

 

[chemEguy]

What precisely do you mean by "different govt. system" ? (Emphasis mine.) As I understand that term, such a change would require a bloody revolution or a Constitiutional Convention. I doubt the markets would favor either of those

I was going to respond but I can’t without making it political.

I’ll leave it as I agree with you.

Like the markets, I have no interest in diverging from what’s been working just fine.

 

[RetiredHappy]

What precisely do you mean by "different govt. system" ? (Emphasis mine.) As I understand that term, such a change would require a bloody revolution or a Constitiutional Convention. I doubt the markets would favor either of those.

I think she meant changes like "getting rid of the department of education". From what I see, half the stuff being done there will need to continue, the other half can be gotten rid of, an example of a smaller government.

 

[FREE866]

Dire predictions get more reads, plus when it does eventually happen, they claim I told you so, without recognizing the majority of their predictions were incorrect.

Yep.
First question I always ask when a dire prediction is made is “ does this person manage money”. Almost always the answer is no. Very telling. They are like carnival barkers.

 

[MC Rider]

Send in the clowns.

 

[Letj]

What a lively discussion! I'm 100% behind the camp that thinks increased deficit spending, high tariffs, and mass deportation of millions of working age people will drive inflation way up. Not sure all those things will actually happen; but that's the current narrative I'm working with.

Especially the cost of housing since labor shortages can result in higher home prices and fewer homes being built. I don’t see it playing out this way because it’s pretty obvious the impact on the economy.

 

[TheWizard]

Markets hit all-time highs very frequently. That said, my personal all-time high was in the 1970s

Explain further.
I find this hard to believe...

 

[TheWizard]

Sure. "Bulls make money and Bears make money but Pigs get slaughtered."

But who decides if one is being a pig or just holding the line? What's the criteria? Most folks who hold the line could be called Pigs but most often--over time--come out ahead and almost always come out ahead of market timers.

As usual, Marko is correct.
Repeat after me: buy and hold always wins...

 

[TheWizard]

The markets have done nothing but made new highs since the beginning - in other words there have been THOUSANDS of new highs. There have been 1538 new DJIA highs since 1896, and 774 new highs since I started investing in 1987. There were 71 new highs in 2017...

Sure there are also pullbacks but the trend for over a century is up, with new highs over and over and over. That's what rebalancing is for.

We are mostly long term investors here - not market timers. How many times will we ask 'what to do' when markets hit new highs for the umpteenth time?

Do nothing has been the best action for long term investors for over a century...

As usual, Midpack is correct.
Repeat after him: Do Nothing...

 

[PlayinwithFIRE]

JP Morgan says you should be investing heavily on all time high days

 

[TheWizard]

Great thread, learned a lot as usual. No one mentioned this, mods might not like this observation and mods you can remove, NP. I don't think this is political. We're possibly looking at an entirely different govt. system. Could be great! Clean out cobwebs and cut govt. spending, or make it more efficient. I'm trying to get my head around how this would affect the markets. My guess is the markets would love it.

As previously mentioned by one of the Mods, please avoid making political comments, even if you think they are not...

 

[TheWizard]

JP Morgan says you should be investing heavily on all time high days

View attachment 52982

Umm, no.
When all-time highs hit, as often they do, put new $$$ into your settlement fund and just wait.
A buying opportunity will soon come...

 

[kevink]

Minor tweaks, which I'd planned to do anyway (but I'll admit that the election results incentivized me to implement): upped our shor-term TIPS ETF (VTIP) from half to two-thirds of our bond position and reduced equities to 40%. I use only Treasuries for fixed income and won't extend duration unless I get paid for it (i.e. at least 20 basis points in additional interest for each year of additional duration).

The Ben Carlson piece posted upthread is good, as is this new post from Tyler at Portfolio Charts:

Three Risk Parity Strategies Most Immune to Politics – Portfolio Charts